2022 (2) TMI 446 - HC - Indian Laws

Court enforces Rs. 85 Lacs debt in settlement agreements, statutory notice valid under Section 138

DILIPBHAI KESHAVLAL SEJPAL Versus STATE OF GUJARAT

The Court held that the debt of Rs. 85 Lacs, including damages agreed upon in settlement agreements, was legally enforceable, rejecting the petitioners' ... Dishonor of Cheque - insufficient funds - petitioner failed to act as per the compromise agreement entered into between the parties - Section 138 of the N.I. Act - HELD THAT:- It is clear that after the dishonor of the two cheques of ₹ 37.50 Lacs each dated 26.11.2016, the respondent-complainant had issued statutory Notice against the petitioners under Section 138 of the N.I. Act. Thereafter, the parties had executed compromise / settlement agreements on three different occasions, i.e. on 16.03.2017, 14.07.2017 and 12.02.2018. However, the petitioner could not abide by the terms of the aforesaid settlement agreements and therefore, after the dishonor of cheques issued by the petitioners in pursuance of the settlement agreement dated 12.02.2018, the respondent-complainant issued statutory Notice to the petitioner dated 20.02.2019 raising demand of ₹ 85 Lacs, which was duly served upon the petitioner on 21.02.2019. A copy of the demand Notice dated 20.02.2019 is produced on record vide Annexure-E wherein, all the above facts have been narrated in unequivocal terms. It is true that originally, the claim of the respondentcomplainant was ₹ 75 Lacs. However, when the petitioner could not honor the two cheques of ₹ 37.50 Lacs, which led to the issuance of statutory Notice dated 13.12.2016 under Section 138 of the N.I. Act by the respondent-complainant raising a demand of ₹ 75 Lacs, the petitioner arrived at a compromise with the respondent-complainant and executed the settlement agreement dated 16.03.2017 whereby, the petitioner agreed to pay additional amount of ₹ 10 Lacs towards loss / damages, over and above the claim of ₹ 75 Lacs, meaning thereby that the petitioner had agreed to pay ₹ 85 Lacs to the respondent-complainant - it is not open for the petitioner to now contend that the claim of ₹ 85 Lacs raised in the statutory Notice dated 20.02.2019 exceeds the original claim of ₹ 75 Lacs since the additional amount of ₹ 10 Lacs is an outcome of the settlement agreement dated 16.03.2017 duly executed by and between the parties and which has not been disputed by the petitioners. There is no dispute regarding the proposition of law laid down in the case of Vijay Gopala Lohar v. Pandurang Ramchandra Ghorpade’s (supra) that the notice issued under Section 138 of the N.I. Act has to be for the cheque amount and not for any other amount. In the statutory Notice dated 20.02.2019, the respondent-complainant has raised a claim of ₹ 85 Lacs, which is the amount of cheque and has expressly stated that a failure to make such payment within the due period would lead to initiation of proceedings under Section 138 of the N.I. Act - the statutory Notice dated 20.02.2019 issued under Section 138 of the N.I. Act clearly makes a bifuraction between the cheque amount of ₹ 85 Lacs and the Legal Consultation / Advocate Fees of ₹ 10 Lacs. The said fact is evident from paragraphs-8(a) and 8(b) of the statutory Notice dated 20.02.2019. Thus, it cannot be said that the statutory Notice is defective in nature. This Court is in complete agreement with the concurrent findings recorded by both the Courts below and hence, find no reasons to entertain these petitions. Before parting, this Court finds it necessary to state that the first claim by way of statutory notice was raised in the year 2016 and for all these years, the petitioners have been successful in depriving the respondent-complainant of his legitimate rights to claim his legally enforceable debt. Hence, appropriate directions deserve to be issued to the trial Court concerned to dispose of the case expeditiously. Since the claim is of the year 2016, the trial Court concerned is directed to expedite the proceedings pending before it and to dispose of the same within a period of One Year from the date of receipt of writ of this order - Petition dismissed. Issues Involved:1. Enforceability of debt under Section 138 of the Negotiable Instruments Act (N.I. Act).2. Validity of statutory notice under Section 138 of the N.I. Act.3. Legality of the trial court's order directing the issuance of process and the revisional court's confirmation.4. Impact of settlement agreements on the enforceability of debt.Detailed Analysis:1. Enforceability of Debt under Section 138 of the N.I. Act:The petitioners challenged the orders passed by the Additional Chief Judicial Magistrate and the Additional Sessions Judge, Rajkot, under Section 138 of the N.I. Act, arguing that there was no 'enforceable debt.' The petitioners contended that the amount mentioned in the statutory notice exceeded the original demand, thus making the claim legally unenforceable.Court's Finding:The Court found that the original claim of Rs. 75 Lacs was modified by subsequent settlement agreements, which included an additional Rs. 10 Lacs for damages, making the total claim Rs. 85 Lacs. The Court held that the additional amount was legally enforceable as it was agreed upon in a settlement dated 16.03.2017, thus rejecting the petitioners' argument.2. Validity of Statutory Notice under Section 138 of the N.I. Act:The petitioners argued that the statutory notice was defective because it included an additional Rs. 10 Lacs for legal consultation/advocate fees, making the total demand Rs. 95 Lacs, which they claimed was not legally enforceable.Court's Finding:The Court clarified that the statutory notice dated 20.02.2019 correctly bifurcated the cheque amount of Rs. 85 Lacs and the legal consultation fees of Rs. 10 Lacs. The notice clearly demanded the cheque amount within the statutory period, making it valid under Section 138 of the N.I. Act.3. Legality of the Trial Court's Order and Revisional Court's Confirmation:The petitioners contended that the trial court's order directing the issuance of process and the revisional court's confirmation were premature and not maintainable.Court's Finding:The Court upheld the orders of the trial court and the revisional court, stating that the trial court had found a prima facie case against the petitioners based on the averments in the complaints. The Court emphasized that the maintainability of the complaints would be adjudicated during the trial, where the petitioners would have the opportunity to present their case.4. Impact of Settlement Agreements on the Enforceability of Debt:The petitioners argued that subsequent cheques issued as part of settlement agreements did not create new liabilities and thus were not enforceable under Section 138 of the N.I. Act.Court's Finding:The Court distinguished the present case from the case of *Lalit Kumar Sharma v. State of Uttar Pradesh*, where the second cheque was issued as part of a compromise during the pendency of a complaint. In the present case, no complaint was registered on the dishonor of the initial cheques. Instead, multiple settlement agreements were executed, and the final statutory notice was issued only after the failure of the third settlement agreement. Therefore, the debt became legally enforceable.Conclusion:The petitions were dismissed, and the trial court was directed to expedite the proceedings and dispose of the case within one year. The Court found no merit in the petitioners' arguments and upheld the orders of the lower courts, emphasizing the legally enforceable nature of the debt and the validity of the statutory notice under Section 138 of the N.I. Act.